Bigger income multiples or just usual Daily Fail stuff?

Westminster

http://www.thisismoney.co.uk/money/mortgageshome/article-4263602/Bank-England-make-EASIER-borrow-mortgage.html

The Bank of England has tweaked an obscure rule which could make it easier for borrowers to get a mortgage of more than four-and-a-half times their annual income.

The rule change applies immediately and effectively loosens the cap placed on the amount of high loan-to-income mortgage lending banks and building societies are allowed to do.

Is this likely to actually result in changes on the ground?

amnblog

The article refers to a cap, which gives the option of more flexibility.


Lenders each have their own policies and limits on how much higher loan to value lending they carry.


If there is a change you would have to be involved in a lot of mortgage cases to notice it.

martinsurrey

Westminster wrote: »

http://www.thisismoney.co.uk/money/mortgageshome/article-4263602/Bank-England-make-EASIER-borrow-mortgage.html



Is this likely to actually result in changes on the ground?

did you read the article?

Currently the BOE limits the number of mortgages a bank can give at over 4.5 times multiples to 15% in any fixed 3 month reference window.

The change is that now they can now lend no more than 15% of mortgages over 4.5 times multiples over a rolling 4 quarter period.

how will this help the banks?

As the time period from the bank offering a mortgage to it being drawn down can be upto 6 months, they dont know when a high multiple mortgage will be drawn, it could potentially fall into one of 3 reference periods for the BOE cap. This means they have to be prudent on offering these loans and keep some head room, they are generally at around 13%.

Under the new rules they will be smoothing out the lumps and bumps meaning the banks can trade closer to the 15% limit.

So about 1.5 in 100 mortgages can go from under 4.5times to over 4.5 times, but they ALL must still pass the MMR affordability tests, so no, no real changes on the ground.

amnblog

I believe they spent over £3M on Consultants but unfortunately could not find a way to make the rule more complex.

Westminster

martinsurrey wrote: »

did you read the article?

Currently the BOE limits the number of mortgages a bank can give at over 4.5 times multiples to 15% in any fixed 3 month reference window.

The change is that now they can now lend no more than 15% of mortgages over 4.5 times multiples over a rolling 4 quarter period.

how will this help the banks?

As the time period from the bank offering a mortgage to it being drawn down can be upto 6 months, they dont know when a high multiple mortgage will be drawn, it could potentially fall into one of 3 reference periods for the BOE cap. This means they have to be prudent on offering these loans and keep some head room, they are generally at around 13%.

Under the new rules they will be smoothing out the lumps and bumps meaning the banks can trade closer to the 15% limit.

So about 1.5 in 100 mortgages can go from under 4.5times to over 4.5 times, but they ALL must still pass the MMR affordability tests, so no, no real changes on the ground.

I did thanks.

PS - 15% of 100 is 15 not 1.5

martinsurrey

Westminster wrote: »

I did thanks.

PS - 15% of 100 is 15 not 1.5

PS increasing from 13% (current) to nearer the 15% limit (say 14.5% under the new system) is a marginal 1.5% of total mortgages going from under to over 4.5X multiples.

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